Miss Jane’s contract of employment for five years was terminated on 31
December 2005 after it had run for three years. Compensation for Sh.300,000
was paid. Her salary at the date of termination was Sh.90,000 per year. If the
contract had run its full term, a total of Sh.180,000 would have been paid as
salary for both 2006 and 2007.
What income is assessable on Miss Jane, and in which years?
Assume that Jane’s contract was not specific, what income is assessable on
Miss Jane and in which years?
Assume Miss Jane was a director in the company paying her compensation.
Her shareholding in the company was 5% of the share capital. What will be the
tax treatment in (i) and (ii) above?